Analyzing International Relations and American Politics

(Illegal) Immigrants Don’t Hurt the Economy

There seems to be an assumption among many populist elements within both the U.S. and the U.K. that immigrants – legal and otherwise – are a net-drain on the economy. This view isn’t completely absurd. After all, basic economic theory would suggest that immigrants steal jobs and depress wages. The neoclassical model, for example, would argue that more workers competing for roughly the same number of jobs would lower wages because there would be an oversupply of labor. The specific factors model comes to a similar conclusion, arguing that an influx of immigrants would seek employment in labor-intensive industries. However, because capital levels would largely remain constant, the increased labor supply would lead to decreasing marginal returns, thus driving down wages due to decreased productivity. Ultimately, neither model is correct. Immigration is a boon for the economy.

The problem with the aforementioned models is they assume all other variables remain constant. Or, to use an economic term, immigration occurs ceteris paribus. Obviously this isn’t really how the market operates, though. As more immigrants enter the country, they expand the overall economy by raising demand. They also need to buy groceries and rent apartments, so while they do take jobs, they also create jobs. It’s also not clear that the jobs taken by immigrants are equivalent to jobs held by citizens. For example, imagine a yard care firm. Often, yard care is quite expensive, and many households aren’t willing to pay such large sums of money for landscaping and lawn care. However, immigrants without much capital or experience might be able to provide a much cheaper and more basic lawn care service. The immigrants would be able to work for households that wouldn’t otherwise have used a lawn care provider. Thus, they aren’t stealing anyone else’s job, they are simply serving a previously ignored sector of the lawn care market. This dynamic also leads to increases in native citizen’s wages because it allows citizens who know the culture, language, and city better to take on higher level jobs that require coordination and interpersonal interaction. This is referred to as complementary task specialization, and it enjoys robust support in the economics literature. Indeed, most economic models estimate that for every immigrant that arrives in the United States (legal or illegal), 1.1-1.2 jobs is created.